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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI RAJESH KUMAR, AM
O R D E R
PER RAJESH KUMAR, AM
This is an appeal filed by the assessee and it is directed against the order dated 23.09.2013 passed by the Ld. CIT(A)-4, Mumbai for the assessment year 2089-90 .
The issue raised in grounds of appeal No.1 is against holding by the CIT(A) that application u/s 154 of the Income Tax Act, 1961(hereinafter called the Act) was not within the time as provided in section 154(7) of the Act and the CIT(A) ought to have held that the period of limitation should be reckoned from the date of order giving appeal effect to the order of the tribunal. The issue raised in the second ground of appeal is against the upholding the action of AO of not reducing the reversal of provisions for custom duty of Rs. 3.50 Cr from the book profits.
The facts in brief are that during the financial year 1987-88 the assessee created provisions for custom duty payable by the assessee to the tune of Rs.3.50 Cr which as per the Government of India policy was not to be paid if the assessee fulfilled certain conditions as prescribed. The assessee fulfilled the said conditions and as a result the provisions for custom duty were no more payable and hence reversed in the financial year 1988-89. The said provisions are stated to be not allowed under the normal provisions of the Act as well as under the MAT provisions which were also upheld by the Tribunal vide order dated 9th March 2007. However these provisions were reversed in the subsequent year i.e. assessment year 1989-90 and credited to the profit and loss account. However while giving appeal effect to the order of tribunal dated 9th March 2007 , the AO while calculating the book profit for assessment year 1989-90 u/s 115 J did not exclude Rs. 3.50 Cr the amount of reversed provisions for custom duty created in 1987-88 AY 1988-89 under clause(i) of explanation to section 115J of the Act. The application u/s 154 of the Act dated 3rd November, 2009 filed by the assessee requesting the AO to rectify the order dated 23rd July, 2007 was also rejected by the AO vide order dated 29th March ,2010 on the grounds that the application was barred by limitation and there was no mistake in the order giving appeal effect. Aggrieved assessee carried the matter before the FAA who also dismissed the appeal of the assessee by observing and holding as under:- “DECISION: 5.1 I have carefully and dispassionately considered the facts and circumstances of the case. All grounds of appeals are focused on the rejection of the appellant's proposition for reduction of appellant's books profit by a sum of Rs. 3.5 crores on account of provision for custom duty of Rs. 3.50 crores pertaining to A.Y. 1988-89 and written back by the appellant A.Y. 1989-90. 5.2. It is not disputed that the appellant had made provision of custom duty of Rs.3.50 crores payable in its books of accounts for the previous year relevant to A.Y. 1988-89. The AO had disallowed such provision of custom duty of Rs.3.50 crores while computing total income of the appellant under the normal provisions of the Act as well as while computing book profit u/s. 115J of the Act in the scrutiny assessment order passed u/s. 143(3) of the Act dated 27.03.1991. Hon'ble ITAT, 'J' Bench, Mumbai vide and ITA No.1006/Bom/1992 dated 09.03.2007 had confirmed such disallowances, both under the normal provisions of the Act as well as under the relevant provisions of sec. 115J of the Act. 5.3. It is also not disputed that the appellant had made provision of custom duty of Rs. 3.72 crores payable in its books of accounts for the previous year relevant to A.Y. 1989-90. The LAO had disallowed such provision of custom duty of Rs. 3.72 crores while computing total income of the appellant under the normal provisions of the Act as well as while computing book profit u/s. 115J of the Act in the scrutiny assessment order dated 30.09.1992 passed u/s. 143(3) of the Act. Hon'ble ITAT, 'J' Bench, Mumbai vide ITA No. 7980/Bom/1992 and ITA No. 7782/Mum/1999 dated 09.03.2007 had confirmed such disallowances, both under the normal provisions of the Act as well as under the relevant provisions of sec. 115J of the Act. 5.4. The appellant wrote back provision of custom duty of Rs. 3.50 crores pertaining to AY. 1988-89 in AY. 1989-90. The LAO allowed such write Rs. 3.50 crores pertaining to AY. 1988- 89 in A.Y. 1989-90 under the normal provisions of the Act. However, he did not allow such relief while computing book profit u/s. 115J of the Act. On this limited issue of disallowance of Rs. 3.50 crores pertaining to A.Y. 1988-89 in AY-1989-90, the appellant reportedly neither preferred any appeal before Ld. CIT(A) nor requested for rectification. The appellant company did not even make this issue as additional ground of appeal
before the Hon'ble ITAT, Mumbai Bench. 5.5 It is further brought to my notice that the appellant had written back provision of custom duty of Rs. 3.72 crores pertaining to A.Y. 1989-90 in A.Y. 1990-91. The LAO allowed such write back of provision of custom duty of Rs. 3.72 crores pertaining to A.Y. 1989-90 in AY 1990-91 under the normal provisions of the Act. However, he did not allow such relief while computing book profit u/s. 115J of the Act. On this limited issue of disallowance of Rs.3.72 crores pertaining to A.Y. 1989-90 in A.Y. 1990-91, the appellant has accepted such disallowance while computing book profit u./s. 115J of the Act in A.Y. 1990-91. No appeal preferred by the appellant on the identical issue in subsequent assessment year 1990-91. 5.6. Having regards to facts and circumstances of the case, the LAO's action is confirmed. Corresponding grounds of appeal are not allowed.
6. In the result, appeal is dismissed.”
Aggrieved by the order of CIT(A) , the assessee has preferred an appeal before the Tribunal. The ld AR for the assessee vehemently submitted before us that the CIT(A) has grossly erred by upholding the order of AO on the issue rectification application u/s 154 of the Act being time barred by taking the period of limitation from the assessment order and not from the last order passed in the instant assessment year i.e. order dated 23rd July, 2007 giving effect to the order of ITAT dated 9th March, 2007. The ld counsel for the assessee submitted before us that the provisions for custom duty were created in both the assessment years i.e. 1988-89 and 1989-90 to the extent of Rs. 3.50 Cr and Rs. 3.72 Cr respectively which accordingly to the AO were disallowed at the time of calculating income of the assessee under the normal provisions u/s 43B of the Act by the assessee suo motto however these were claimed as deduction from the income calculated for the purpose of MAT. AO while assessing the income of the assessee u/s MAT added back the said provisions for the reasons that same represented contingent liability and not allowable at the time of framing order u/s 143(3) of the Act. Ultimately the matter travelled up to the tribunal and tribunal decided the issue against the assessee vide order dated 9th March, 2007 upholding the action of AO that provisions created for custom duty were not to be allowed. The assessee reversed the provisions so created in AY 1988- 89 in the AY 1989-90 of Rs. 3.50 Cr as not being payable after meeting the conditions as per GOI policy. The ld AR argued that the said provisions could not be taxed again at the time of reversal as these were not allowed deduction earlier at the time of creation thereof. The Ld AR submitted that while giving the appeal effect to ITAT order dated 9th March, 2007 the AO did not reduce the written back provisions of Rs. 3.50 Cr relating to AY 1988-89 while computing income under MAT in the order dated 23rd July, 2007 for AY 1989-90 as the assessee was entitled to consequential relief in view of the tribunal upholding the action of the revenue in disallowing the provisions in the calculation income under MAT. The ld AR submitted that when the assessee moved a rectification 3nd November, 2009 , the AO rejected the same as time barred not moved within the time as per the provisions of section 154(7) of the Act by taking the period of limitation from the date of assessment order and not from the order dated 23rd July 2007 giving appeal effect to tribunal order which accordingly to the AR of the assessee should be taken from the last order passed by the AO dated 23rd July, 2007. The AR also relied in defence of his arguments in the case of Peninsula Land Ltd Vs CIT (2008)175 Taxman 58 (Bom) and prayed that in view of the facts and the ratio laid by the jurisdiction high court , the order CIT(A) and AO be set aside and AO should be directed to exclude the amount of Rs. 3.50 Cr from the income assessed under MAT.
Per Contra the ld DR relied on the order of authorities below and requested to uphold the same.
We have heard the rival contentions and perused the relevant records placed before us including the impugned orders. On the basis of records and submissions brief facts are that the assessee created provisions of Rs. 3.50 Cr in AY 1988-89 for custom duty payable which were reversed in AY 1989-90 the year before us when they ceased to be payable as per the Govt of India Policy. At the time of creation of these provisions the deduction was not allowed while calculating the income under MAT by the AO in the assessment proceedings whereas the assessee suo motto disallowed the said provisions u/s 43 B of the Act under normal provisions of the Act in the return of income filed meaning MAT provisions. The issue of allowance the said provisions under MAT travelled up tribunal and tribunal decided the issue against the assessee vide order dated 9th March 2007. The AO while passing the order dated 23rd July, 2007 giving appeal effect to tribunal order dated 9th March 2007 did not allow the consequential relief of reducing the reversed provisions of Rs. 3.50 Cr from income calculated for the purpose of MAT. Thereafter the assessee moved a rectification application u/s 154 of the Act on 3rd November, 2009 requesting the AO to correct the anomaly which crept in the order dated 23rd July 2007 resulting into assessing the provisions for custom duty of Rs. 3.50 Cr reversed during the year by not excluding the same thereby taxing the reversal of provisions of Rs. 3.50 Cr which was not allowed as deduction in the year of creation by the AO in AY 1988-89 and the action of the AO was also upheld by the tribunal. Now the issue before us whether the application as filed by the assessee u/s 154 of the Act is barred by limitation under the provisions of section 154(7) of the Act. For sake of convenience and better understanding the provisions of section 154(7) of the Act are extracted below:- “154 (7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under this section shall be made after the expiry of four years (from the end of the financial year in which the order sought to be amended was passed] A perusal of the above provisions, it is very clear that no amendment shall be made after expiry of four years from the end of the financial year in which the order sought to be amended is passed. In our opinion the assessee has filed an application seeking amendment in the order passed on 23rd July 2007 giving effect to the tribunal decision dated 9th March 2007. The period of limitation has to be taken from 31st March,2008 and accordingly the application of the assessee is not barred by limitation provided u/s 154(7) of the Act. The case of the assessee is also supported by the decision of Peninsula Land Ltd Vs CIT (supra) in which it has been held that provisions of section 154(7) does not apply to order passing on the benefit allowed to the assessee by virtue of order passed by the appellate order but such power of the AO to pass order giving effect to any appellate order is inherent and traceable to section 143(3) and 144 of the Act. Accordingly we hold that the application of the assessee u/s 154 is not barred by limitation. On the second issue we are of the considered view that the provisions reversed of Rs. 3.50 Cr has to be reduced from the income under MAT as no deduction has been allowed earlier. In our opinion the order passed by the CIT(A) is not correct and therefore can not be sustained. Accordingly we set aside the same and direct the AO to reduce the provisions for custom duty reversed of Rs. 3.50 Cr from income under MAT.
In the result, the appeal of the assessee is allowed. Order has been pronounced in the Open Court on 14.12.2016.